Shell slides on £4.7bn US energy bet

Monday 15 July 2002 23:00 BST

THE giant Shell group was rocked by fears it could lose out on a massive £4.7bn ($7.4bn) bet on future energy prices. The shares slumped before the rest of the market. Later, Shell said it believed it would make 'satisfactory returns' on its commitments over 20 years.

Its Houston energy trading side paid £4.7bn under 'tolling' agreements to have US power plants turn its gas into electricity, which Shell would then sell. Power prices have since plunged, hit by September 11 and sagging confidence after the collapse of energy trader Enron.

George Namur, a former general manager at Shell's energy trading side, says he was told to make optimistic price forecasts to justify the £4.7bn commitment. Shell said this was 'not correct' and the project went through its usual 'rigorous appraisal'. The agreements were openly disclosed in its annual accounts.

How the agreements turn out depends on power prices recovering. Shell says it is 'not making losses' on them at present and is confident of a 'positive' outcome.